BillMax and GAAP Accounting

What is GAAP Accounting and what part does BillMax play?

GAAP Accounting refers to Generally Accepted Accounting Principles, a common set of accounting principles, standards and procedures that companies must follow when they compile their financial statements. BillMax’s part is GAAP Revenue Recognition. Care must be taken when booking pre-billing for services.

When selling multi-month or future services, you cannot recognize the revenue until it is delivered. For example, if you sell a one year service for $120 in January, you can recognize only $10 of the service. $110 is deferred.

From a GAAP point of view for A/R, if customer hasn’t paid, they have an A/R of $10 and you have no liability. (This is different from a Customer Point of View where their A/R is $120.) If the customer pays $120, from the GAAP point of View, the A/R is $0.00 with a liability of $110. You owe the customer $110.00 until service delivered.

BillMax implements two forms of GAAP Revenue Recognition in the A/R Aging Report. If all billing is on the first of the month, they are equivalent. Assume billing is on Jan 15.

Form 1 (Deferred Revenue):

1/2 a month is recognized in January, then 11 months, then 1/2 month the next January

Form 2 (Deferred Revenue by Monthly Price):

A full month is recognized in the month billing begins, then 11 months, so January would have a full month.

The BillMax A/R supports both versions when running it with GAAP in mind. It is critical that whichever version you choose, you run both the Sales and A/R reports with the same version.